The occurence of expenditure during the course of business is very natural. Generally, expenditure is incurred to increase the efficiency of business and further returns. These are braodly classified into two categories, i.e. capital expenditure and revenue expenditure. Capital Expenditure is an expense made to acquire an asset or improve the capacity of the asset. Conversely, revenue expenditure implies the routine expenditure, that is incurred in the day to day business activities. The most … [Read more...]

In simple terms, profit can be understood as all the income that is received by an individual. It is the lifeline of the business, as, without profit, the survival is difficult, rather impossible. In accounting, profit means surplus, i.e. the excess of total revenue over the expenses. Such a profit is known as accounting profit. On the other hand, in economics, you might have heard the term economic profit, which is nothing but the amount left over after deducting all implicit and explicit … [Read more...]

Business is carried out with an aim of earning profit. It works as an incentive to the entrepreneur, for the risk taken and resources spent, during the financial year. Profit can be broadly classified as gross profit, operating profit and net profit. Gross profit implies the amount left over from revenues after deducting the manufacturing cost. It shows the firm's efficiency in production and pricing. Conversely, operating profit alludes to the profit attained after deducing cost of … [Read more...]

Small traders and partnership firms, do not maintain their books of accounts as per double entry system. They used to keep a track of cash and credit transactions only. However, at the end of the financial year, these firms also want to know the position of business. For this purpose, statement of affairs is prepared at the beginning and at the ends of the period, so as to determine the overall change in the capital, during the financial year. Statement of affairs is often confused with … [Read more...]

In business and financial context, margin is defined as the distinction between production or acquisition of the product to the seller and its selling price. Gross Profit Margin implies a financial tool, employed to identify the financial health of the business, by depiction the amount of money left after deducting cost of production from the sales. On the contrary, net profit margin, is a financial metric determining the company's profitability, by exhibiting the percentage of revenue left … [Read more...]

Net profit can be understood as the profit arrived after working on all expenses (both cash and non-cash), interest, taxes, and losses. It is the actual profit received from business activities by the company during the accounting period. It is not exactly same as net income. Technically, net income is used to mean the actual amount remained with the firm after deducting dividend to the preference shareholders. In business parlance, both the two terms heard quite often. Many use the terms net … [Read more...]

Accounting information is reported in the form of a financial statement. The financial statement is the final outcome of the accounting process and is prepared as per the basic accounting principles, concepts and assumptions. It helps to draw conclusions on the company's profitability, efficiency, performance, and position. These are furnished in such a way that the users of financial statement can understand them easily and take decisions. It includes profit& loss account, balance sheet, … [Read more...]

Trial Balance is a part of the accounting process, which is a schedule of debit and credit balances taken from all the ledger accounts. As every transaction affect two sides, i.e. every debit has a corresponding credit and the reverse is also true. The total of debit and credit balances are equal in the trial balance. In contrast, the Balance Sheet is the statement that exhibits the company's financial position, by summarizing the assets, liabilities, and capital on a particular date. In … [Read more...]

Profit making is the main motto of every company. It works as an incentive to the entrepreneur for the risk taken by him, for running a business. It is like the fuel, which helps the business to survive, grow and expand in the long run. In business parlance, Net operating profit after tax, i.e. NOPAT, is the actual after-tax operating profit of the company or in simple terms, it is the earning of the company after interest and tax. Net Income, on the other hand, refers to the actual profit … [Read more...]

Cash flow Statement is as important as the other two parts (Profit & Loss Account and Balance Sheet) of the accounting information furnished in the form of financial statements at the end of the financial year. It is the statement which describes the flow of cash and cash equivalents in and out the organization. The statement is helpful to the stakeholders or say interested parties, in learning about the sources and uses of the company's cash during a particular financial year, from … [Read more...]